In Part 1 of this series, you learned that long-term care is expensive and that there are several different ways to pay for it, including Medicare and long-term care insurance.
If your Medicare coverage runs out and you don’t have long-term care insurance (or the coverage you have is inadequate or it runs out), what are the other options?
We posed this question to Chris Bratton, owner of Bratton Law Group, a Life Care Planning Law Firm in the Philadelphia area. Chris says that private funds and two public benefit programs are the remaining options.
What are private funds? In layman’s terms, it means your own money. “If you have a good income and plenty of assets, one option is to withdraw some of your assets and use those to pay for your long-term care,” Chris explained. “The type of care needed—as well as the cost—can vary widely. The cost could be as little as a few thousand a month, or it could be more than $14,000 a month.”
Chris says that most people can’t handle that kind of outlay for very long, so the public benefit options almost always come into play. If you're a qualifying veteran or the spouse of a qualifying veteran, you may be able to receive some VA Pension Aid & Attendance benefits. “That's a monthly payment by the VA,” notes Chris. “The payment can vary based on a number of factors. VA benefits are means tested, which means that applicants must meet certain asset limits, and the VA has a three-year lookback period. If there has been any gifting during that time frame, it could delay benefits.
As mentioned in Part 1, Medicaid is usually the default for people who can't afford to private pay for an extended period of time. Medicaid is a needs-based program with strict income and asset limits, and a five-year lookback period. “From date of application back five years, Medicaid wants to know what financial transactions took place,” Chris said. “They want to see what money came in and what money went out. If any assets were gifted to others, Medicaid will impose a penalty.”
This penalty isn’t monetary, it’s a delay in when you can get benefits. “Medicaid uses a formula to determine the penalty period, which is the number of months you have to wait to receive Medicaid benefits,” Chris explained. “The patient has to pay for care during that time frame.”
Generally speaking, Medicaid applicants must have less than $2,000 in assets, but there are ways around that if the applicant is married. “There's something called a community spouse resource allowance,” said Chris. “It's essentially half of the assets, but it's capped out at a certain number. Some states have a income test, too, so if your income is too high, you may need a qualified income trust in order to qualify for Medicaid.”
Medicaid is a federal-state partnership, which means that every state has its own take on the basic rules. “The good news is that every state has a Medicaid program, which means that older adults can access funding to pay for long-term care,” Chris added. “The key to making the most of Medicaid benefits is asset protection. Contrary to popular belief, you don’t have to spend down all your assets to qualify. There are ways to protect assets and set them aside for your care or the care of a spouse. The best way to do this is to work with a qualified elder law attorney.”